Oversold on Daily Charts

Eight days ago when the S&P futures were trading around the 2110 level, I stated that the distance between the price and the 10-bar moving average on my daily chart was alarming. Anytime the S&P futures are more than 30 points away from the 10-bar moving average on my daily chart it is a significant condition. When the S&P futures were trading at the 2110 level it was more than 55 points away from the 10-bar moving average on my daily chart. I stated that I would be looking to go into cash as I was looking for the market to pull in and get to an oversold condition. We got this pullback and the S&P futures traded down to 2040 today. The 10-bar moving average acted as a magnet and the S&P futures pulled in 70 points. I now have a very oversold condition on my daily chart. A couple days ago I stated I was looking for 1-2 more days of a pullback before the market pushes back upward. It is possible that tomorrow the market will start pushing back up. Going forward I believe the market will make a series of higher lows into the end of the year.

Today the market sold off due to the fear of the Federal Reserve raising interest rates in November and or December. I do not see it. Today Macy’s reported weak third quarter earnings and cut its annual profit forecast. That is now two major US retailers, Walmart and Macy’s, that are struggling. I do not believe the Federal Reserve will raise rates in November or December. The Federal Reserve is talking about a 2% inflation target and we are nowhere close to that.

Today oil inventories came in heavy. At one point oil traded down around the 41.60 level and is currently trading at the 41.74 level. The key number for oil is 41.74 on the weekly chart. If oil closes below the 41.74 level on Friday I will have a sell signal on oil on the weekly chart and oil will be in serious trouble. If this happens I think oil will have some sort of an oversold bounce before trading lower. I would not be surprised to see oil in the mid to upper 30s in the near future.

Gold was up a couple dollars today. When gold traded up into the 1180-1185 level I stated I was bearish on gold on the bigger time frames and that if I was a long term investor I would look to sell gold and gold stocks on any rally above that level. Gold is in no man’s land here and I am waiting for a bounce. I am not sure if gold will get this bounce and I am waiting to see if a pattern sets up.